Grain markets are mixed this morning after yesterday’s positive day on Mother Nature and weather concerns related to Harvest 2019.
“Mother Nature may be forgiving this year, or next year, but eventually she’s going to come around and whack you. You’ve got to be prepared.” – Geraldo Rivera (American journalist)
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Mother Nature Playing Dirty for Harvest 2019
Grain markets are mixed this morning after yesterday’s positive day on Mother Nature and weather concerns related to Harvest 2019. Soybean prices found some gains on more buying from China, as well as some cooler weather in the forecast for next week. Kluis Advisors noted this week that “When soybeans close higher in the month of September – which has happened only about 20% of the time in the last 30 years – it signals higher soybean prices in the month of October.” 
Stronger soybean prices supported corn prices a bit, while spring wheat prices gained on the ongoing quality and quantity fears from all the rain that Mother Nature has been serving up in Western Canada and the Northern Plains. Grain markets are also looking at next Monday’s quarterly stocks report from the USDA (something I’ll talk a little more about in Friday’s FarmLead Breakfast Brief).
The Canadian federal election continues to roll towards its October 21st deadline but last night, the agriculture leaders of each party had a YouTube debate, hosted by the Canadian Federation of Agriculture. Following the #AgDebate hashtag on Twitter, there was some offside comments made about current agricultural practices by a few people and, unfortunately, not much international trade was mentioned (something that I consider to be one of the bigger issues not getting much love from the candidates yet).
Mother Nature Not Letting Up
Mother Nature has provided a couple of weeks of warmer weather in the Corn Belt and that’s seemingly helped the crop perk up a bit. The USDA said on Monday afternoon in their most recent crop progress report that corn good-to-excellent (G/E) ratings jump 2 points on the week to 57%, while soybean G/E ratings stayed flat at 54%.  In my opinion though, the more significant data points are that only 29% of the U.S. corn crop is mature (57% is the five-year average) and just 34% of soybean fields are dropping leaves (59% average). This points to the crop still being about one to two weeks behind normal development.
This in mind, Mother Nature is expected to serve up more rain is expected in the Midwest this coming weekend, with the system likely hitting an area from Kansas City diagonally up to Detroit.  Some states in the U.S. have already passed their normal frost date and with this current week relatively warm, this should help the maturity of crops. However, moving into next week (and the month of October!) cooler weather is on the horizon and combined with wet fields not being able to dry out well, many are preparing for a difficult, sloppy harvest 2019. 
Speaking of, rain continued to fall yesterday in parts of Western Canada and the Northern Plains, with the regions in Manitoba and North Dakota getting hit again, which only compounds what’s already fallen over the past week. In south-central Manitoba, rain from last Thursday to Saturday was record-setting and estimates are that $2 Billion CAD worth of crop will be lost in terms of quantity and more importantly, quality.  The northern two-thirds of North Dakota got 4 to 6 inches from Mother Nature last weekend while central Minnesota has gotten 8.5 inches over the last 3 weeks.
Shaun Haney of Real Agriculture notes that it would be great to have Mother Nature on the payroll, but obviously she can’t be, so having multiple plans to deal with the weather is a must.  It’s certainly frustrating to do, but having those plans in place are a method of preparation so that when Mother Nature or something else unexpected shows up, you and your team are all on the same page. And as my grandfather (a lifelong farmer) used to say, “Always expect the unexpected.”
China Buying American Ahead of Trade Talks
China’s customs data show that they imported 1.68 MMT of soybeans in August, which is more than 6x what China imported last August and up 85% over July’s imports.  Further, the People’s Republic imported 163,000 MT of pork last month and while that’s technically down 11% from July’s pork imports, it’s still an indication that Beijing is trying to combat food price inflation. The relentless and uncontrollable spread of African Swine Fever being a catalyst for pork prices in China to climb 50% in August, this is also pushing up the price for beef and poultry not just in the People’s Republic, but around the world.
U.S.-China trade war negotiations will reconvene in two weeks in Washington with U.S. Treasury Secretary Steven Mnuchin planning to lead the discussions with his counterpart, Chinese Vice Premier Liu He.  There might be some reverse psychology in the works as China’s Foreign Minister said at the UN this week that “For now and for the foreseeable future, the United States is and will still be the strongest country in the world.”  On the flipside, President Trump has shared many times that he’s “not looking for a partial deal” when it comes to a resolution. 
Complication in Wheat Exports
In Monday’s FarmLead Breakfast Brief, we looked at the September supply and demand estimates from AAFC for Canadian crops. As I mentioned in this week’s Wheat Markets Insider column for the Alberta Wheat Commission, Agriculture Canada is forecasting Canadian durum stocks to fall 32% year-over-year to 1.1 MMT while non-durum wheat inventories by the end of the 2019/20 crop year are expected to crawl up to 5 MMT. Despite some of the concerns over quality, your expectations for durum and wheat prices skyrocketing to those levels seen in 2014 might be too far-fetched, given the ample supply still available in the market. One healthy data point though is that Canadian durum wheat exports in 2019/20 are expected to climb a little to the highest they’ve been in 5 years.
On that note, Ukraine is seeing grain fly out of its ports to start the 2019/20 marketing year. Through last week, 12.4 MMT of grain has been exported, up 50% year-over-year. This includes 7.3 MMT of wheat exports, which is up 26% from the pace a year ago. However, Ukraine’s rush of wheat exports and other crops is becoming a pattern as the Black Sea country tends to aggressively ship out crops for the first 3 months and then slow down rather quickly thereafter. Conversely, Russian wheat exports are more consistent, but this is likely a function of the country’s transportation infrastructure being a little more reliable.
Staying in wheat exports, Argentina might have some trouble meeting its planned targets this year thanks to, once again, Mother Nature. The Rosario Grains Exchange said recently that drought combined with freezing temperatures are to blame for the poor crop conditions in Argentina’s main wheat-producing region.  Yield losses are already estimated at somewhere between 20% to 40%. It’ll be interesting to see what those combine yield monitors say when Argentina’s wheat harvest 2019 starts up in November.
At 7:45 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3261 CAD, $1 CAD = $0.7541 USD)
Dec Corn: unchanged at $3.748 USD or $4.974 CAD
Nov Soybeans: -5¢ (-0.55%) to $8.893 USD or $11.803 CAD
Dec Soybean Meal (per short ton): -$1.60 (-0.55%) to $297.90 USD or $395.41 CAD
Dec Soybean Oil (cents per lbs): -0.11¢ (-0.4%) to 29.09¢ USD or 38.61¢ CAD
Dec Oats: +0.3¢ (+0.1%) to $2.738 USD or $3.634 CAD
Dec Wheat (Chicago): -2.3¢ (-0.45%) to $4.795 USD or $6.364 CAD
Dec Wheat (Kansas City): -0.8¢ (-0.2%) to $4.043 USD or $5.366 CAD
Dec Wheat (Minneapolis): +2.5¢ (+0.45%) to $5.47 USD or $7.26 CAD
Nov Canola: +2.3¢ (+0.2%) to $10.213/bu / $450.30/MT CAD or $7.694/bu / $339.26/MT USD
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